Florida Approves 14.5% Workers’ Comp Rate Hike in Response to Court Rulings

September 27, 2016 by

The Florida Office of Insurance Regulation (OIR) has given contingent approval for an overall statewide workers’ compensation rate increase of 14.5 percent to take effect Dec. 1, 2016. The rate increase is in response to two recent Supreme Court rulings undoing reforms passed in 2003 and rocking the state’s workers’ compensation system.

In the Sept. 27 order, OIR disapproved the National Council on Compensation Insurance’s (NCCI) filing for a 19.6 percent increase, on behalf of insurers, saying that much of an increase on new, renewal and outstanding policies was not justified.

Instead, OIR said NCCI could submit a revised filing for a 14.5 percent increase.

“After a thorough review of the workers’ compensation insurance rate filing submitted by the [NCCI] and careful consideration of hundreds of public comments and testimony received from interested stakeholders, [OIR] has issued an order that gives contingent approval to an overall combined average statewide rate increase of 14.5 percent versus the requested 19.6 percent,” OIR said in its statement.

OIR said approval of the revised rate increase is contingent on NCCI amending the filing to include the recommended changes stipulated within the order. The amended rate filing must be filed with OIR for review and approval no later than Oct. 4, 2016. NCCI said it would review the order and respond “in a timely manner.”

NCCI’s rate filing was originally submitted in May of this year and amended in June to address the impact of the three recent legal changes, including two Florida Supreme court case decisions (Castellanos v. Next Door Company and Westphal v. City of St. Petersburg) and legislatively-mandated updates to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual (HCPR Manual).

OIR said if NCCI submits the required amended rate filing and the 14.5 percent is subsequently approved, the individual rate impacts will include:

  • A 10.1 percent statewide average rate increase for the April 28 Florida Supreme Court decision in the case of Castellanos v. Next Door Company, which found the mandatory attorney fee schedule in Section 440.34, Florida Statutes, unconstitutional as a violation of due process under both the Florida and United States Constitutions.
  • A 2.2 percent statewide average rate increase for the June 9 Florida Supreme Court decision in the case of Westphal v. City of St. Petersburg, in which the Florida Supreme Court found the 104-week statutory limitation on temporary total disability benefits in Section 440.15(2)(a), Florida Statutes, unconstitutional because it causes a statutory gap in benefits in violation of an injured worker’s constitutional right of access to courts. The Supreme Court reinstated the 260-week limitation in effect prior to the 1994 law change.
  • A 1.8 percent statewide average rate increase related to updates within the Florida Workers’ Compensation HCPR Manual per Senate Bill 1402. The manual became effective on July 1, 2016.

The rate increase would become effective on Dec. 1 for new and renewal business, with no change in rates for current in-force policies, despite NCCI’s recommendation that it be applied on a pro-rata basis for the remainder of each policy term.

OIR also noted in the order that if an increase in litigation activity continues or further escalates, as has been the case since the Supreme Court’s Castellanos ruling, and has the effect of extending claim durations, delaying return to work and possibly creating inefficiencies in the system, then there could be a more substantial increase in workers’ compensation costs in the near future.

Employer groups acknowledged that the recent court rulings meant the state had to raise rates. However, that does not mean they are pleased. They maintain that the higher rates will help trial lawyers, not workers.

“Putting job creators and injured workers first is the right thing to do to keep Florida’s workers’ compensation system working. Unfortunately, the Florida Supreme Court’s ruling is not about safety or protecting workers. The effect of the Castellanos decision is to raise costs for no other reason than so plaintiff trial lawyers can raise fees,” said Mark Wilson, president and CEO of the Florida Chamber of Commerce.

The Chamber said that for employers, the rate increase is particularly troublesome because many small businesses haven’t budgeted for higher rates.

The National Federation of Independent Businesses had a similar reaction.

“While the commissioner has done what was necessary in response to the Supreme Court undoing legislation that capped attorney’s fees and maintained reasonable rates, our small business owners will be paying the price,” NFIB/Florida Executive Director Bill Herrle.

He said NFIB will seek legislation to reform the workers’ compensation market.

Insurance carriers will be pressing lawmakers for change as well.

“We continue to support the 2003 reforms to Florida’s workers’ compensation system that protected employees and controlled costs for employers prior to the rulings,” said Logan McFaddin, regional manager for the Property Casualty Insurers Association of America (PCI). “We must work with Florida lawmakers on solid solutions to ensure we can return to a vibrant marketplace in Florida where injured workers can get the care they need, while at the same time, workers’ compensation costs do not hinder employers and employees. We need a workers’ compensation system in Florida that we all can rely on.”

Lawyers representing injured workers said they were disappointed in the OIR ruling and accused OIR Commissioner David Altmaier of missing an opportunity to protect both workers and employers.

“He could have rejected the insurance industry’s secretive ploy for corporate welfare to line its own pockets, all while falsely blaming a workers’ compensation rate hike on two court rulings that don’t actually make any rate change necessary,” said Mark Touby, president of Florida Workers’ Advocates. “Insurance companies like to point blame at lawyers, but we agree with Florida’s business community that this unwarranted 14.5 percent increase in premiums will have a damaging impact on employers across our state.”

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